Reagan and needy nations

October 1, 1981

It will do the third world no good to take the cynic's view of President Reagan's pep talk on the "magic of the marketplace" to aid nations asking for cash on the barrelhead. There are two better reactions to the Reagan remarks at the annual meeting of the World Bank and International Monetary Fund (IMF):

* To seize on the US President's strong expressions of praise and support for these chief international loan channels to the third world -- and of pride in his country's major contribution to postwar development. "You can count on us to continue to shoulder our responsibilities in the challenges we face today," he said. These are fitting words of commitment by the world's richest nation in advance of the forthcoming Mexico summit meeting on how the rich and poor nations can cooperate to benefit all mankind.

* To act in each nation on the kind of economic, social, and political reforms to make international loans and other aid effective: Such reforms would be no less necessary if Mr. Reagan had not called for them. Indeed, they have been going on under conditions imposed by the World Bank and IMF.

The bank's continual supervisory visits and demands for strict accounting have not been welcomed with open arms in the developing world. But they have kept money from going down the rathole that many seem to imagine developmental aid to be. The bank's latest report cities a number of countries starting to restructure their economies in various ways: Senegal, for example, with trims in public investment and direction of it into more directly productive uses; Tanzania, with improving incentives to producers of primary exports; Thailand, with efforts to bring energy prices in line with international levels; Pakistan, with tougher standards of financial performance to reduce inefficiency in the public manufacturing sector.

Meanwhile, candidates for IMF loans have been moving toward the kind of market pricing and budgetary and monetary responsibility that Mr. Reagan calls for, without waiting for the IMF to come up with expected tightened conditions. Brazil is conspicuous for self-imposed reforms, and India is an example of a country trying to anticipate what the IMF will want and starting much of it in advance.

When it comes to increased involvement of private enterprise, as Mr. Reagan suggests, the trend also has already begun. But some cautions are in order, as former World Bank president Robert McNamara may have told his successor A.W. Clausen. Mr. McNamara recognized the role of the industrial countries' large private firms in the developing world. But he saw that the special task of the bank's affiliate for working with private enterprise, the International Finance Corporation, should be to foster the home-grown variety of private enterprise.

Mr. Clausen's remarks this week echoed Mr. Reagan's emphasis on economic discipline, as did those of IMF managing director Jacques de Larosiere. But Mr. Clausen vigorously called for aiding the poorest countries just when the theme of the richer countries is to reduce spending both at home and abroad. He sees this aid not simply as humanitarianism but as a sound economic investment.

Mr. Reagan acknowledged the need of such countries foa aid as well as trade. Yet Congress has not been willing to appropriate fully even the modest amount he has asked for over the next few years. Here is where the American public can show whether it takes the cynical view mentioned at the beginning -- or is willing to give its President credit for a sincere concern about the developing world that the public ought to support.